8 July 2009
editorial
Abuja — A bi-monthly French publication, The African Report, recently published what it claimed were its findings on the state of banks across the globe. The journal, which based its report on research on the effects of the global stock market collapse, suggested that only four of Nigeria's existing 24 banks are in good shape. This report could have been dismissed with the wave of the hand, but there seem to be some correlation between it and an earlier World Bank report that the Nigerian banking environment was 'under stress.'
The link between the two reports in a period of global economic meltdown would appear to justify reasons why reports like this should not be wished away, as most Nigerians, buoyed by national pride and patriotism would want to do. We are also mindful of the pledge of Central Bank of Nigeria Governor, Sanusi Lamido Sanusi, in an interview with London's Financial Times that he planned a series of reviews in the banking sector. We believe that he was talking, not just from the standpoint of his position, but also from the viewpoint of an insider in the sector.
It is on this premise that call on the CBN and the Nigerian Deposit Insurance (NDIC), to do a methodical study of the situation in the financial sector and create buffers in order to avoid the effect of collapse of any weak on the strong ones. Such a situation could deleteriously damage the fragile mono-economic base of the nation. We call on the CBN to device a means of thoroughly inspecting and examining Nigeria's existing banks with a view to ensuring that they stand as they should.
In a period of global meltdown, no bank is totally insulated from the shenanigans of others. The fact that there is inter-bank lending shows that a problem in one bank can trigger a domino effect that may structurally damage the Nigerian economy. This is why it is imperative for the monitoring agencies to take these reports very seriously. We should guard against a situation where the kind of crisis that affected the Nigerian Stock Exchange in the full glare and the impotence of regulatory agencies as well as the monitor of the press should affect our banking sector.
If there is anything to be gained from the French report, it is the fact that the Nigerian media are either not conversant with the interpreting economic trends, or have engaged themselves in other matters to be bothered with them; on both counts, they fail investors, both local and international, and they fail their readers. The objective analyses needed to trigger an early warning system were lacking. Banks have made themselves too influential in the media that this is having some negative effects on the media's objectivity in reporting banking and finance issues. The Nigerian media should be wary of disgorging everything they take from foreign media, whose agenda in reporting certain issues may not be immediately apparent. This caveat is particularly relevant when it comes to strategic matters like the foundation of our economy.
We are glad that the new CBN leadership seem to understand this dynamics. We implore it to dig deep and ensure that all loopholes are plugged and sanctions imposed where necessary in such a way that it does not overheat the system and jeopardise depositors' confidence. We ask both the NDIC and the CBN to carry out the kind of internal audit that would show the true strength of the Nigerian banking system and shore up the capacity of those that may be so weak that their collapse may impact negatively on our economy. Using the press as battleground to run each other down does no one any good. We call on the directors and managers of Nigeria's financial institutions to keep a low profile, live according to the rules and ensure that this country weathers the storm of global meltdown without the scars that have brought down the economy of bigger nations. We believe that there are innate checks and balances in the system to make this a possibility. And we hope these are scrupulously applied.
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